Exam 15: Administrative Procedures

The IRS audited the tax returns of Dan Jackson,a gifted painter.It contended that,between 2003 and 2005,Jackson received $500,000 for his paintings,but reported only $75,000.Jackson attributed the shortfall to his receipt of cash at art fairs and street fairs.He allegedly concealed the cash payments in separate bank accounts unbeknownst to his CPA.What tax compliance issues regarding the alleged underreporting are pertinent to the CPA?

The maximum failure to file penalty is a total of 25% of the underpayment.

What is the difference between the burden of proof for civil and criminal fraud?

Which of the following statements regarding Circular 230 is false?

In order to appeal to the Appeals Division,a taxpayer must submit a protest letter to the IRS

For innocent spouse relief to apply,five conditions must be met.Explain them.

Explain one of the two exceptions to imposing interest from the original due date of the tax return until the date the tax deficiency is paid.

Identify which of the following statements is false.

The taxes shown on Kate's tax returns for 2012 and 2013 were $6,000 and $9,000,respectively.Kate's withholding tax for 2009 was $7,000 and she paid no estimated taxes.Kate filed her 2013 return on April 3,2014,but she did not have sufficient funds to pay the balance due.She pays the $2,000 balance due on June 19,2014.Kate's AGI for 2013 did not exceed $150,000.Calculate the penalties Kate owes on her 2013 tax return.

Steve files his return on April 1 and pays the entire amount of tax for the year at that time,$5,000.He is audited and pays the deficiency of $1,500 two years later.The maximum amount Steve may file a claim for refund for eighteen months later is

Your client wants to avoid any penalty for underpayment of estimated taxes by making timely deposits.Determine the amount of the minimum quarterly estimated tax payments required to avoid the penalty.Assume your client's adjusted gross income last year was $140,000.

Explain accountant-client privilege.What are the similarities and differences between it and attorney-client privilege?

Which of the following activities is protected by accountant-client privilege?

If a return's due date is extended,a taxpayer

You are preparing the tax return for Agre Corporation,which has sales of $50 million.Agre made a $2 million expenditure for which the appropriate tax treatment,deductible or capitalizable,is a gray area.The corporation's Chief Financial Officer wants you to deduct the expenditure.What tax compliance issues should you consider in deciding whether to deduct the expenditure?

The "Statement on Practice in the Field of Federal Income Taxation" includes all of the following areas of mutual competence except

Identify which of the following statements is false.

On July 25 of the following year,Joy files her current calendar-year tax return without having requested an extension.On October 8,she pays the amount due.The tax shown on her return is $25,000.Her current-year withholding tax is $20,000.Joy pays no estimated taxes and does not claim any tax credits on her current year return.Calculate the penalties that the IRS is likely to assess.Ignore the penalty for underpayment of estimated taxes.Assume she did not commit fraud.

The statute of limitations,which stipulates the time frame within which either the government or the taxpayer may request a redetermination of tax due,usually expires 6 years after the date on which the return is filed.

Christie and Billy jointly file this year.Billy intentionally omits $5,000 in gambling winnings.Christie fraudulently deducts $1,000 in business expenses.The IRS audits the return,assesses a $2,500 deficiency and begins collection efforts two years after the timely filing of the return.Christie and Billy divorced one year before the deficiency was assessed.Can Christie receive any tax relief from the full $2,500 deficiency?